Verizon may not block the usage of third-party tethering apps that turn Android devices into mobile hotspots, the Federal Communications Commission (FCC) ruled today. Nor may Verizon charge a $20 tethering fee for users on either tiered data plans or unlimited plans.

Verizon has agreed to pay a $1.25 million settlement fee to the U.S. Treasury to resolve the matter.

The FCC’s decision relies on the fact that Verizon purchased 700MHz spectrum from the U.S. government in 2008. As part of the deal, Verizon had to guarantee that it would not restrict the types of devices or applications used on that spectrum.

“Today’s action demonstrates that compliance with FCC obligations is not optional. The open device and application obligations were core conditions when Verizon purchased the C-block spectrum,” said FCC Chairman Julius Genachowski in a statement. “The massive innovation and investment fueled by the Internet have been driven by consumer choice in both devices and applications. The steps taken today will not only protect consumer choice, but defend certainty for innovators to continue to deliver new services and apps without fear of being blocked.”

Because the FCC’s ruling is based solely on this “C-Block” spectrum deal, the same rules do not apply to AT&T, Sprint, or T-Mobile, all of which charge users a fee for using wireless tethering apps.

Tethering, for those of you wondering what the heck this is all about, allows users to access the Internet from other devices, like laptops, via their smartphone or tablet’s wireless signal.

Of course, users who pay for a usage-based data plan will still pay heavily for tethering their devices, since Verizon charges about $2per megabyte over the initial allotted data (which starts at 1GB at a cost of $50 per month). Watch a video or two, and you’re looking at a massive phone bill coming your way. If you’re still on an unlimited plan, well, you win!

For those of you interested in getting in on the new, unfettered tethering goodness can find many tethering apps on the Google Play Store. We’d recommend giving PdaNet a go.